IABA XXXVIII Conference Mexico's Emerging E-Government Program: The Role of the Internet in Promoting Economic Development, Democratic Governance, & the Rule of Law Robert M. Kossick, Jr., Esq. CIDE • Mexico City IABA XXXVIII Conference Cochabamba, Bolivia July 9-13, 2002

I. Introduction: Latin American Government Goes Online A. Essential Idea: Internet-based systems of e-governance can facilitate democratic governance, promote economic development, and strengthen the rule of law B. Early E-Governance Initiatives in the Americas: 1. Chile (www.estado.cl) (112 pages/1:131K) 2. Argentina (www.gobiernoelectronico.ar) (244 pages/1:151K) 3. Venezuela (www.gobiernoenlinea.ve) (70 pages/1:345K) 4. Peru (www.perugobierno.gob.pe) (73 pages/1:351K) 5. Colombia (www.gobiernoenlinea.gov.co) (85 pages/1:497K) 6. Brazil (www.redegoverno.gov.br)

I. Introduction: Latin American Government Goes Online C. Initial Developments in Mexico: The National Development Plan (2001-2002) & the "E-Mexico" Program: 1. Calls for the creation of a networked society wherein government information, service, and functions can be obtained and/or realized on line a) Rapid growth reflected in increasing total number of “.gob” registrations (from 12 in 1995 to 1,082 in 2001) b) Produces a “page to citizen” ratio of 1:376K c) Mexico hopes to have completed the transition to digital governance by 2007 C.1.a. It should be noted that not all of these pages are active.

I. Introduction: Latin American Government Goes Online D. Potential Benefits to be Derived from the E-Mexico Program: 1. Overcome developmentally debilitating effects of endemic inefficiency, formalism, corruption, and mistrust 2. Create the conditions under which Mexico's prior efforts at economic, political and legal reform can flourish 3. Conserve scarce government and private sector resources E. Collateral Consequences Associated with the E-Mexico Program: 1. Facilitate the creation of transparent institutions capable of supporting the consolidation of democracy in Mexico 2. Drive foreign investment and economic development in Mexico 3. Enhance Mexico's competitiveness in the global economy D.3. It is estimated that the E-Mexico program could save the Mexican government $100 billion pesos annually.

II. The E-Mexico Program: Core Components A. Overview of Primary Components of the E-Mexico Program: 1. Transparency 2. Electronic Governmental Filings (Tramites) 3. Electronic Government Procurement 4. Electronic Public Registries of Commerce & Property 5. Electronic Tax Filings B. Other Components 1. Education (www.sep.gob.mx), Health (www.salud.gob.mx), and Customs (www.aduanas.sat.gob.mx)

II. The E-Mexico Program: Core Components C. Transparency: Declaranet, the Ley Federal de Responsabilidades Administrativas de los Servidores Publicos (LFRASP), & the Ley Federal de Transparencia y Accseo a la Informacion Publica Gubernamental (LFTA) 1. SECODAM managed digital channel created for purpose of capturing and recording the patrimonial information of public servants associated with the entities and dependencies of the Federal Public Administration a) Although registry has “public character,” data of individual public servant can only be published with prior consent of same C.1. An estimated 200,000 patrimonial declarations were filed via Declaranet in 2002.

II. The E-Mexico Program: Core Components 2. Declaranet registry works in conjunction with the provisions of the new LFTA that: a) Require obligated subjects of the Federal Public Administration to make structural and operating information (budgets, contracts, licenses, concessions, etc.) available to the public via Internet b) Create administrative mechanisms by which citizens can proactively request and obtain information of a non-reserved character from all branches, entities, and dependencies of government C.2.b. The LFTA gives obligated subjects until June 2003 to create and implement said request mechanisms.

II. The E-Mexico Program: Core Components 3. Regional Analogues: Conceptually and functionally similar to government sponsored transparency sites in Argentina (www.cristal.gov.ar), Brazil (www.braziltransparente.gov.br), and Peru (www.transparencia-economica.mef.gob.pe) 4. Benefits to be derived from enhanced transparency in Mexico: a) Fear of subsequent investigation and discovery, compounded by government's demonstrated commitment to holding infractors accountable, could deter civil servant corruption C.4.a. This is a positive development insofar as a recent CIDE study reveals that Mexico has higher levels of corruption with respect to the management of public resources than Argentina, Brazil, and Chile.

II. The E-Mexico Program: Core Components b) Remedy information failure, thereby facilitating the resolution of past disputes and the elucidation of present issues c) Give meaning to the guarantee of access to information contained in Art. 6 of the Mexican Constitution d) Improve Mexico's compliance with its information obligations under the Inter-American Convention of Human Rights and the International Convention on Civil and Political Rights e) Strengthen citizen and investor confidence in government, thereby enhancing Mexico's political and economic stability C.4.b. Examples of issues that could be resolved and/or elucidated include the 1961 coup attempt against president Lopez Mateos, the 1968 massacre at Tlatelolco, the 1971 student-Halcon confrontation, the 300(+) disappearances which occurred in the 1970s and 1980s, the 1994 assassination of presidential candidate Colosio, and the current controversy involving PEMEX's alleged diversion of funds in connection with the 2000 executive election. C.4.e. This observation is consistent with the findings of a PWC survey of 161,000 corporate executives that indicates a direct correlation between transparency and levels of investment.

II. The E-Mexico Program: Core Components D. Electronic Governmental Filings: Tramitanet 1. SECODAM managed digital channel created for purpose of: a) Providing information pertaining to substantive and procedural requirements for tramites b) Electronically submitting routine tramites 2. Regional Analogues: Conceptually and functionally similar to government operated online filing sites in Argentina (www.nacion.ar/espaciocivico/tramites), Brazil (www.redegoverno.gov.br), Colombia (www.dafp.gov.co), Peru (www.perugobierno.gob.pe/tramites), and Venezuela (www.gobiernoenlinea.vz/gobierno/portal/?Mlval=tram) D.1.b. Currently 10 tramites can be filed electronically in Mexico. The key to increasing this number is overcoming the obstacle posed by the general lack of e-payment solutions.

II. The E-Mexico Program: Core Components 3. Benefits to be derived from online governmental filing: a) Disintermediation of the procedure for obtaining government permits and licenses could simultaneously reduce fraud b) 24/7 filing capacity saves time, expedites process c) Introduction of more efficient and transparent filing procedures could result in the entry of more SMSEs into the formal economy, thereby driving economic development and improving governmental tax receipts d) Reduction in amount of physical paperwork could contribute to preservation of scarce governmental and private sector supply and archival resources e) Formation of a robust and reliable database regarding commercial and civic activity D.3.a. This would be a positive development insofar as tramite related fraud currently ties up an estimated 7% of the average Mexican household budget. D.3.c. Peru was able to increase tax revenue by $1.2 billion in this way. D.3.c. Such an outcome could help offset the estimated $61,000MDP that the Mexican government loses each year to the operation of the informal economy.

II. The E-Mexico Program: Core Components E. Electronic Government Procurement: Compranet 1. SECODAM managed digital channel created for purpose of: a) Making it easier for suppliers to discover government´s needs in terms of goods and services b) Standardizing procurement procedures and documentation c) Reducing the involvement of public servants d) Providing for the electronic submission of bids E.1. At the time of its introduction, only an estimated 2% of Mexico's 25,000 annual public bids were realized via Compranet. This figure is projected to increase to between 15%-30% by 2003.

II. The E-Mexico Program: Core Components 2. Regional Analogues: Conceptually and functionally similar to government managed electronic procurement sites in, inter alia, Argentina (www.nacion.ar/mercado/licitaciones), Brazil (www.redegoverno.br/ServInfo), & Chile (www.chilecompras.cl) 3. Mexico, working in conjunction with the World Bank, has signed EGP collaboration agreements with Colombia, Costa Rica, and Peru, inter alia

II. The E-Mexico Program: Core Components 4. Benefits associated with Compranet: a) Enhanced auditing and monitoring opportunities (made possible by Compranet's searchable archive of procurement data) b) Curtail civil servant fraud-driven supplier surcharges, thereby increasing the amount of government resources available for development projects c) Reduced access costs facilitate increased levels of citizen participation in bidding for public contracts d) Expanded network of national and international suppliers e) Improved compliance with Mexico's obligations under the OECD bribery and OAS corruption conventions E.4.a. Information obtained from this database gave rise to Mexico's 2001 "Towelgate" scandal. E.4.b. Such surcharges can be as high as 20%. E.4.c. In this connection, the total number of registered system users increased from 65 in 2000 to 829 in 2001. Similarly, the total number of annual "hits" recorded by the system increased from 280,000 in 1997 to in excess of 3 million in 2001.

II. The E-Mexico Program: Core Components F. Electronic Public Registries of Commerce & Property: Siger (Sistema Integral de Gestion Registral) 1. Federally operated, Internet-based system created for the purpose of: a) Electronically searching Mexico's public registries of commerce and property b) Electronic recordation of liens 2. Regional Analogues: Conceptually and functionally similar to Internet-based public registry systems in Venezuela and Peru (www.orlc.gob.pe)

II. The E-Mexico Program: Core Components 3. Benefits to be realized through the Siger system: a) Reduced likelihood of registry fraud and/or error b) Expedited registry searches c) Creation of integrated federal-state database of encumbered property 4. The availability of a more efficient and reliable public registry system, combined with the reform of Mexico´s debtor-creditor laws, could: a) Help reduce the backlog of hipoteca based suits b) Stimulate asset based lending, thereby helping to remedy Mexico's deficiency of commercial credit c) Strengthen the productivity of Mexican capital F.3.a. Registry trafficking and record manipulation continues to be a pervasive problem in Mexico. F.4.a. There are currently an estimated 54,000 hipoteca suits pending in Mexico. F.4.b. Bank lending represented an estimated 72% of all financing in Mexico in 1994. This percentage declined to 44% in 2001. This situation has forced many small and medium size businesses to obtain credit from local loan sharks ("changarros"). The daily cost of said credit ranges from 10% to 20%.

II. The E-Mexico Program: Core Components G. Electronic Tax Filings: 1. Digital channel created by Mexico's Servicio de Administración Tributaria (SAT) for purpose of: a) Filing tax returns b) Making payments (via electronic funds transfer) c) Confirming receipt of payments d) Reviewing prior tax transactions 2. Regional Analogues: Conceptually and functionally similar to government operated online tax sites in, inter alia, Chile (www.sii.cl), Colombia (www.impuestos.dian.gov.co), Peru (www.sunat.gob.pe), and Venezuela (www.seniat.gov.ve) G.1. It is hoped that the advent of online tax filing will help reduce Mexico's estimated 40% tax evasion rate. G.2. The introduction of online tax filing has resulted in the submission of record number of corporate and individual tax returns in Brazil and Chile.

II. The E-Mexico Program: Core Components 3. Benefits to be derived from electronic tax filing: a) Eliminate opportunities for fraud and/or error b) Reduce amount of physical paperwork involved in filing taxes, thereby contributing to conservation of scarce governmental and private sector resources c) Offset weaker than expected amounts of tax revenue caused by soft oil market, weakened inflows of tourism, elevated levels of temporary and/or permanent out-migration, and the SAT’s losing tax litigation record d) Maximize tax revenue inflows, thereby securing the funds needed to service Mexico's foreign debt and operate the government G.3.d. This is a critical issue given the fact that Mexico now has the world's second largest foreign debt. The 5% contraction in net revenue inflows that occurred between 2001 and 2002 only exacerbates the tension between Mexico's debt service obligations and the operation of the government. It has been estimated that electronic tax filing will increase tax collection by between 10% and 15%.

III. The E-Mexico Program: Policy Recommendations A. Allocate adequate funds for E-Mexico's continued development B. Expand the E-Mexico program to include the administration of justice, electronic voting, and online plebiscites/referenda C. Make E-Mexico sites more interactive, where appropriate D. Strengthen e-payment systems E. Strengthen telecommunications infrastructure and internet access F. Increase IT training and support for government officials and citizens G. Ensure citizen privacy and transactional security A. The 2002 budget for E-Mexico was US$67 million. This was significantly lower than the US$200-300 million originally projected for 2002. The Mexican government is currently looking for ways to share the costs of the E-Mexico program with the private sector. B. The state of Nuevo Leon is conducting an electronic election in 2003. This project is generally viewed as representing a test run for the 2006 executive election. C. Mexico has been slow to introduce and/or adopt online payments. To the extent that the realization of government services and functions commonly entails the payment of a standard processing fee, improvement on this point is critical. D. Mexico had a fixed teledensity rate of 13.7 lines per 100 people in 2001. Internet access during the same period was estimated to be between 1.9% and 2.7% of the population. If Mexico is to accomplish its goal of improving telecommunications infrastructure, it is imperative that the monopoly power of Telmex be curtailed. Mexico's low rate of Internet access, on the other hand, can be improved by encouraging the continued introduction of alternative forms of micro-access, including, for example, cyber cafes, public terminals, rural digital community centers, mobile sites, etc. The adoption of these recommendations could help Mexico improve its most recent global ICT ranking (44th place, behind Argentina, Brazil, and Chile, per the World Economic Forum). F. A major obstacle to the successful operation of the E-Mexico program entails the traditional customs and habits of Mexico's public servants and citizens. The reluctance of these individuals to embrace a digital culture can be partially overcome by the provision of structured training and/or ad hoc assistance. G. Mexico currently has legislation addressing e-signatures, data messages, the conservation of data messages, and the protection of consumers in the online environment. Personal data protection and information crimes bills are presently pending.

IV. The E-Mexico Program: Conclusion A. Notwithstanding the program of economic and political liberalization undertaken by Mexico, problems persist: 1. Economic: Diminishing salaries and purchasing power, rising unemployment, reduced levels of physical security, declining exports and FDI, and a widening gap between rich and poor 2. Political: Lack of meaningful change in values and practices of Mexican politicians, inability of a divided political leadership to reach an accord regarding the scope and pace of future structural reforms A.1. Mexico's economic growth declined from 7% in 2000 to 0% in 2001. An estimated 617,000 people lost their jobs during this time. Extra-judicial killings and kidnappings are, in turn, on the rise. Exports declined 15% between 2000 and 2001, while FDI decreased by 24% between the 1st trimester of 2001 and 2002. Finally, the gap between Mexico's rich and poor – already one of the world's most extreme – has not changed since 1992. A.2. Corruption continues to be rampant in Mexico. In the early part of 2002, the U.N. issued a report indicating that between 50% and 70% of Mexico's judiciary is corrupt. In a related vein, 76% of respondents in a recent Tec de Monterrey study stated that they expect Mexican corruption to become worse between 2003 and 2004. Congressional gridlock, on the other hand, continues to preclude the definition of political priorities and hamstring the effective operation of the executive branch.

IV. The E-Mexico Program: Conclusion B. Having passed nearly ten years characterized by more "pain" than "gain," an increasing number of Mexicans question and/or reject U.S. inspired economic policies and political practices C. Continued economic hardship and political stagnation could, consistent with the cyclical nature of Mexican history, impede Mexico's ongoing process of reform and development B. Surveys (and election results) reveal a growing rejection of Salinas-/Zedillo-style "technocrats" as well as a strengthening opposition to privatization and globalization. C. The failure to improve economic conditions and end the political stagnation associated with divided government may cause Mexico to embrace more traditional, populist leaders in 2003 and 2006.

IV. The E-Mexico Program: Conclusion D. Such an outcome would: 1. Undermine the original objectives of NAFTA (i.e., the creation of a dynamic and stable trilateral market) 2. Make the prospect of trade integration under the FTAA less attractive to the nations of Latin America 3. Create the perception of uncertainty and instability in Mexico, thereby inciting disinvestment (possibly to new WTO members such as China and Taiwan) and reducing Mexico's ability to compete in the global economy D.3. A recent Institute for Management Development (IMD) Study reveals that Mexico's global competitiveness ranking declined from 36th place in 2000 to 41st in 2001. Mexico is now below both Chile (20th place) and Brazil (35th place) in terms of global competitiveness.

IV. The E-Mexico Program: Conclusion E. The E-Mexico program presents a unique opportunity to overcome the systemic formalism, inefficiency, fraud, mistrust, and impunity that have long operated to preclude sustained economic and political development in Mexico F. In taking advantage of this opportunity, Mexico could do much to improve the efficiency and certainty of commercial and governmental interactions G. This outcome, to the extent it bolsters Mexico's diminished faith in free markets and liberal democratic values, could provide Mexico with the resolve it needs in order to consolidate its fragile democracy and realize the long term developmental benefits associated with its current program of economic reform

V. Annex 1: E-Mexico URLs A. Government Portal: www.gob.mx B. Declaranet: www.declaranet.gob.mx C. Tramitanet: www.tramitanet.gob.mx D. Compranet: www.compranet.gob.mx E. Electronic Registries: www.secofi-ssci.gob.mx/siger F. Electronic Tax Filings: www.sat.gob.mx

V. Annex 2: E-Mexico Legislation A. ELECTRONIC SIGNATURES, DATA MESSAGES, CONSUMER PROTECTION: Decreto por el que se Reforman y Adicionan Diversas Disposiciones del Codigo Civil para el Distrito Federal en Materia Comun y para Toda la Republica en Materia Federal, del Codigo Federal de Procedimientos Civiles, del Codigo de Comercio, y de la Ley Federal de Protección al Consumidor, D.O., 29 de Mayo de 2000 B. DIGITAL CERTIFICATES: Convenio de Colaboración para Establecer los Mecanismos de Emisión y Administración de los Certificados Digitales, que se Utilizaran para Acceder al Registro Publico de Comercio y para Realizar Transacciones Comerciales, que Celebran la Secretaria de Comercio y Fomento Industrial y el Colegio Nacional de Correduría Publica Mexicana, AC, D.O., 6 de Octubre de 2000

V. Annex 2: E-Mexico Legislation C. DIGITAL CERTIFICATES: Convenio de Colaboración para Establecer los Mecanismos de Emisión y Administración de los Certificados Digitales, que se Utilizaran para Acceder al Registro Publico de Comercio y para Realizar Transacciones Comerciales, que Celebran la Secretaria de Comercio y Fomento Industrial y la Asociación Nacional del Notariado Mexicano, AC, D.O., 6 de Octubre de 2000 D. CONSERVATION OF DATA MESSAGES: Norma Oficial Mexicana NOM 151-SCFI-2002, Practicas Comerciales - Requisitos que Deben Observarse para la Conservacion de Mensajes de Datos, D.O., 4 de Junio de 2002

V. Annex 2: E-Mexico Legislation E. DECLARANET: Decreto por el que se Expide la Ley Federal de Servidores Publicos, y se Reforman la Ley Organica de la Administracion Publica Federal, D.O., 13 de Marzo de 2002 F. DECLARANET: Acuerdo que Establece las Normas que Determinan como Obligatoria la Presentación de las Declaraciones de Situación Patrimonial de los Servidores Públicos, a Través de Comunicación Electrónica, D.O., 19 de Abril de 2002 G. TRANSPARENCY: Ley Federal de Transparencia y Acceso a la Informacion Publica Gubernamental, D.O., 11 de Junio de 2002

V. Annex 2: E-Mexico Legislation H. COMPRANET: Acuerdo que Establece la Información Relativa a los Procedimientos de Licitación Pública que las Dependencias y Entidades de la Administración Pública Federal Deberán Remitir a la Secretaría de Contraloría y Desarrollo Administrativo por Transmisión Electrónica o en Medio Magnético, así como la Documentación que las Mismas Podrán Requerir a los Proveedores para que éstos Acrediten su Personalidad en los Procedimientos de Licitación Pública, D.O., 11 de Abril de 1997 I. COMPRANET: Acuerdo por el que se Establecen las Disposiciones para el Uso de Medios Remotos de Comunicación Electrónica, en el Envío de Propuestas Dentro de las Licitaciones Públicas que Celebren las Dependencias y Entidades de la Administración Pública Federal, así como en la Presentación de las Inconformidades por la Misma Vía, D.O., 9 de Agosto de 2000

V. Annex 2: E-Mexico Legislation J. TRAMITANET: Decreto por el que se Reforma la Ley Federal de Procedimiento Administrativo, D.O., 30 de Mayo de 2000 K. TRAMITANET: Acuerdo por el que se Establecen las Disposiciones que Deberán Observar las Dependencias y los Organismos Descentralizados de la Administración Pública Federal, para la Recepción de Promociones que Formulen los Particulares en los Procedimientos Administrativos a Través de Medios de Comunicación Electrónica, así como para las Notificaciones, Citatorios, Emplazamientos, Requerimientos, Solicitudes de Informes o Documentos y las Resoluciones Administrativas Definitivas que se Emitan por esa Misma Vía, D.O., 17 de Enero de 2002

V. Annex 2: E-Mexico Legislation L. ELECTRONIC DECLARACIONES: Resolución Miscelánea Fiscal de 1997, D.O., 13 de Febrero de 1998 M. ELECTRONIC DICTAMENES: Resolución Miscelánea Fiscal para 2002, D.O., 30 de Mayo de 2002 N. FISCAL INCENTIVES FOR TECHNOLOGICAL DEVELOPMENT: Decreto por el que se Adiciona el Artículo 163 a la Ley del Impuesto sobre la Renta, D.O., 13 de Diciembre de 2001 O. FISCAL INCENTIVES FOR TECHNOLOGICAL DEVELOPMENT: Decreto por el que se Expiden la Ley de Ciencia y Tecnología y la Ley Orgánica del Consejo Nacional de Ciencia y Tecnología, D.O., 5 de Junio de 2002

V. Annex 2: E-Mexico Legislation P. INFRASTRUCTURE/ACCESS: Ley Federal de Telecomunicaciones, D.O., 7 de Junio de 1995 Q. PENDING DATA PROTECTION LAW: Decreto por el que se Expide la Ley Federal de Proteccion de Datos Personales, approved by the Mexican Senate, 30 de April de 2002 R. PENDING DATA PROTECTION LAW: Iniciativa de Ley de Proteccion de Datos Personales, Gaceta Parlamentaria, 7 de Septiembre de 2002

V. Annex 2: E-Mexico Legislation S. PENDING E-SIGNATURE INITIATIVE: Con Proyecto de Ley Federal de Firma y Comercio Electrónicos, Mensajes de Datos y Servicios de la Sociedad de Información, Gaceta Parlamentaria, 14 de Mayo de 2002 T. PENDING E-SIGNATURE INITIATIVE: Con Proyecto de Decreto que Reforma y Adiciona Diversas Disposiciones del Código de Comercio, en Materia de Firma Electrónica, Gaceta Parlamentaria, 17 de Mayo de 2002 U. PENDING INFORMATION CRIME INITIATIVE: Iniciativa de Reformas y Adiciones a Diversas Disposiciones del Codigo Penal para el Distrito Federal en Materia del Fuero Comun, y para Toda la Republica en Materia de Fuero Federal (Delitos Informaticos), Gaceta Parlamentaria, 22 de Marzo de 2000